Aramis, Porthos, and Athos have the following marginal value schedules for swords: Aramis, Porthos, and Athos are
Question:
Aramis, Porthos, and Athos are the only buyers of swords in the community, and swords are produced at a constant marginal cost of $7 per sword.
a. If the industry is competitive, how many swords will be produced and at what price will they be sold? Justify your answer.
b. Suppose that a social planner orders 5 swords to be produced, with 4 distributed to Porthos and 1 to Athos. What is the social loss in this situation (compared with competitive equilibrium)? Justify youranswer.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: